Government not inclined to tight money policy: Pranab Mukherjee

The government is against tightening monetary policy in order to curb rising food prices, as this would impact economic growth, according to finance minister Pranab Mukherjee.

His comments come in the wake of a spike in food prices and a weak monsoon that have led to increasing inflationary pressures in recent months. Economists and the government expect wholesale inflation to beat the central bank's 5 per cent forecast for the fiscal ending March.

Mukherjee said the government was encouraging imports of essential commodities that are in short supply to prevent the rising prices of essential commodities from adversely impacting growth. He added that the government was taking the measures at the time but he could not accept the dear money policy or credit curbs, as it would have an adverse impact on overall growth. Mukherjee was speaking to reporters on the sidelines of a conference.

Analysts point out the minister's remarks are in line with those of the Reserve Bank of India governor, D Subbarao, who said, on 15 September, that the monetary authority would not roll back the low interest rate regime in a hurry and would only do so when it was certain of a recovery. A severe drought across 44 per cent of its 626 districts has raised concerns of a weak farm output that will hit an economy that, according to central bank forecasts, is expected to experience a sharp reduction in the pace of growth over the past seven years.

The wholesale price index saw an increase in annual terms in early September for the first time in three months, which increased pressure on the central bank to abandon its easy monetary policy.

The food articles sub-index increased an annual 15.4 per cent, which was higher than previous week's 14.8 per cent rise.